A Call for Education Planning

College fund savingsSuccessful families agree that higher education is essential to the success of future generations, and they also realize that costs are only going to continue to rise. If paying for your children or grandchildren’s tuition is a must (similar to a liability), and you know the exact number of years until they start undergraduate or graduate school (their investment horizon), why not approach saving for their education like you would saving for retirement?

One such way to tackle this goal is through the use of 529 college savings plans. 529s are unique in that there are no income restrictions on contributions, and the contributions can grow and be withdrawn tax-free as long as the distributions go toward qualified expenses (tuition and fees, room and board, books, supplies, and equipment). However, the benefits to your family go much further.

In addition to providing Roth-like advantaged growth and withdrawals, 529 plan assets are also removed from the owner’s estate. This means if a parent or grandparent, who owns a 529 plan with a family member as a beneficiary, were to pass away, the value of the 529 plans would not be included in their gross estate1. And, the total contributions as of 2016 to individual 529 plans can be as high as $235,000 to $452,210 (Pennsylvania) per beneficiary, depending on which state you choose to open the plan. (more…)

Safeguarding digital property in a web-based world

At a recent technology event I attended on the Internet of Things, it amazed me how people’s lives will be touched in the future by ‘smart’ systems at home, in the car and on the go. As technology continues to gravitate toward the cloud and social networking, it’s important to look at how your digital property is distributed at the time of your death.

What is digital property?

Digital property includes:Closed lock on digital background

  • Computing devices (smartphones, eBook readers, computers, etc.)
  • Data storage devices
  • Electronically stored information
  • User accounts (including email, social networking sites, web blogs, online gaming, etc.)
  • Domain names
  • Intellectual property rights in digital property

Why does digital property matter?

Digital property is extremely personal and sentimental – this is where many now store pictures, videos and their most prized projects and conversations. Digital property can also be financially valuable – creating worlds or real estate in online games, web presence through blogs and social media, etc.

When privacy laws conflict with helping your family gather pictures and prized possessions from your best and last moments, it can cause enormous stress on your family.  (more…)

Passwords, pin codes, and security

I recently went to visit a friend in a secure building. He didn’t answer his phone when I called from the front door to let me in, but the building had a keypad entrance system.  After a few repeated attempts, I was able to find the correct key code and let myself into the building. When I got to his front door, he was a bit upset that I was able to “hack” into his building. I said it’s pretty easy to figure out PIN codes and passwords because people pick easy to remember numbers, words and patterns. Most of the time you just try the most obvious options first, and you can guess the security code.

In research done by DataGenetics.com in 2012, of the 3.4 million accounts they looked at 11% of people had the PIN code 1234. Over 6% had 1111 and almost 2% had 0000.  Hacking for passwordGiven that knowledge trying only 3 PIN codes gives me about a 20% chance of guessing someone’s personal PIN code.

Passwords for computers, emails, and online accounts are not much different.  Every year hackers post online usernames and passwords they have harvested. SplashData, a password management company, compiles a list of the most common passwords of the year. In 2013 the top three passwords were 123456, password and 12345678. Other common passwords included phrases like amazon, adobe, password1 and one of my favorites: trustno1.

Since most sites require usernames and passwords for access, and our brains are not designed to hold 50 different complex unreadable passwords, many of us opted to make them easy to remember.  Unfortunately, an easy password to remember is an easy password to hack. Below are a couple of things to consider when you create pin codes and passwords to help make them more secure.

PIN codes

  1. Select PIN codes that are random and have no association to you. For example a PIN code of 3976 is much better than a birth year of say 1960. If I know the year you were born, I would make that a PIN code to try.
  2. Select a PIN code that is not an easy visual pattern on a keypad. DataGenetics found 2580 was the 22nd most popular PIN code because it is the numbers down the center of the keypad on your phone.  The code 1397 is an easy guess as well because it is the corners for the phone keypad going clockwise.

 Passwords

  1. Avoid using any part of your login or the site name in your password. If your login to amazon.com is joe.example@fakeemail.com don’t make your password joe123 or Amazon1.
  2. Have a different password for every site. I know this can be a big pain, but if a hacker steals your password at one site, they won’t be able to use it at a different site. Imagine if your password was compromised at some site you used three years ago once, and you only use one password. How many sites do you have to update? How much of your data would be at risk (banking, shopping, investment, email)? With a unique password at each site you can reduce your risk.
  3. Try to use a random password. A password like Fj%9cX44 is much better than F00tballs. While F00tballs has the normal 8 character limit with numbers and upper/lower case letters, hackers are getting smarter and computers are getting faster so simple character substitutions are still risky.
  4. Use an uncommon phrase. For a while, people suggested using a simple phrase such as “ILikeSchool.” However, as the hacking has improved, many security experts now recommend that you use non-sensical sentences as passwords. A phrase such as “eat_baseball_Yards” or “doughnuts around circles” is more difficult to breach.
  5. Try using unique logins for various accounts. If possible, I like to have a login that is unique at each site. Also, if it requires an email address, I like to have a few email accounts I can use for different sites. You can easily sign up for multiple Gmail, Hotmail or Yahoo email accounts.
  6. Use a password management program. If it is really hard to remember all those passwords, there are several programs out there that will securely store your passwords. These programs will store you username and passwords and log you into the website automatically. A quick search for Password Manager in Google or Bing will get you on your way.

As I said above, I don’t think we were meant to remember so many sites, logins and passwords stored in our brains. Writing it down on a piece of paper is just asking for trouble. And storing them in an Excel spreadsheet isn’t any better. There is hope on the horizon. As we work with biometric systems for voice and visual recognition we soon might be able to have our image and voice as our PIN code. We might be able to use a fingerprint and say our name to get in our email. No longer will we need to store all these random phrases, we will only need to remember our name. Oh, and the code to my friend’s building was 2468.

Getting debt under control

I recently had the good fortune of being featured in this article which appeared on the front page of the Seattle Times Business section, and I want to share it with you.

A.J. and Amy are a young couple burdened by debt who did not have the resources to pay for a financial planner. The Seattle Times reached out to me through my affiliation with the Puget Sound Financial Planning Association and asked if I would build them a plan. After several meetings we were able to identify and build a plan around their short and long term goals. I am thrilled to report that they feel like they are finally in control of their debt and retirement savings. Most importantly, they have developed peace of mind around their finances.

Please keep in mind no two investors are alike, this article referenced above is a specific recommendation based on A.J. and Amy’s personal finances. If you would like to give the gift of financial peace of mind, I am always more than happy to help your friends and family develop their own personal plan.

Protecting yourself against electronic wire fraud

It seems like every year thieves become more creative in finding new ways to steal. A disturbing new trend is directly targeting financial advisors and their clients. Financial institutions are seeing a noticeable increase in attempts at fraudulent wire transfers by email “spoofing,” where an email request appears to be sent from the client, but is actually from a fake-but-similar email account (or sometimes it’s the client’s actual account).

Think, for a minute, about the emails you have sent to your advisor. If your email account was hacked, the hacker would have access to all of those emails in your sent folder. They could easily send an email (from “you”!) to your advisor requesting a fund transfer to a third-party bank account, along with convincingly forged letters of authorization. If you’ve ever emailed a scanned copy of something you’ve signed, they have access to your signature too. Often, by the time someone realizes the request is fraudulent, it is often too late. The money is already gone, the transfer cannot be unwound, and the wire fraud theft is complete.

It is our policy to never accept instructions like this via e-mail, but in response to this increased risk, we have trained our employees to identify warning signs of electronic wire fraud attempts. We have also reviewed and improved our procedures to verify a wire transfer request is legitimate before acting on it, particularly in scenarios where the transfer is going to a third party.

However, it’s important to take steps to make sure your information is secure and avoid the possibility of this type of fraud altogether. We use www.box.com to securely share files with our clients and keep that sensitive information out of your inbox.

Just to be safe, here are some tips on how you can help protect your email accounts from being hacked:

  1. Make sure to use secure complex passwords. We recommend choosing a password with a minimum of 8 characters, including upper & lower case letters, numbers and symbols.
  2. Don’t use the same passwords on multiple accounts. If you get hacked in one, they have access to everything.
  3. Use double authentication if possible. This requires you to enter an extra code when logging in from an unrecognized IP address. Click here to learn more about Google’s 2-step verification.
  4. If you get email on your smart phone, make sure the phone is password protected.
  5. Beware of storing documents in your email that contain your signature, social security number, or other non-public personal identifying information. If your account gets hacked, the thief will have everything they need to steal your identity.
  6. Don’t ignore signs that your email account has been hacked, like finding emails you didn’t send in your ‘sent’ folder, or hearing from your friends that they’ve received spam from your email address.
  7. If you do get hacked, be sure to change your passwords immediately! Also call your financial institutions to make sure your accounts have not been compromised.

Have you written your letter of instruction?

image036Maybe you’ve heard of this before. A letter of instruction is a document you write to your executor and family that contains your personalized wishes and instructions for settling your estate. Although it does not carry any legal authority, a letter of instruction can be used to provide tremendous added detail about your financial affairs that doesn’t fit within a will or trust.

One of the most important purposes of a letter of instruction is to lead the person in charge of settling your estate through the process step by step. A good letter of instruction should contain the following:

  • Detailed list of your assets and belongings.
  • Copy of your monthly budget.
  • Login ID and password list.
  • Contact information for financial professionals and beneficiaries.
  • Location of important documents such as the will, trust, deeds, birth certificate, tax returns, bank statements, bills, life insurance, etc.
  • Creditor statements for any mortgages, credit cards or other loans.
  • Location of keys for house, auto or safe deposit box.

A key function of the letter of instruction is to specifically indicate which household belongings go to which heirs. Your will and/or trust will generally only address big ticket items. Through the letter you can decide who receives the family albums, the silverware, stamp collection, artworks or family knickknacks. Providing clear guidance can keep your family from devolving into arguments and resentment when emotions and grief run high.

Burial Arrangements

You can also use a letter of instruction to tell your family how and where you would like to be buried or cremated. You can be as elaborate as you desire. If you want, you can choose funeral readings, pick your flowers, charitable donations, etc. You can even prewrite your own obituary here, so be creative. Whatever your desires, putting your wishes in writing will help reduce guesswork and potential arguments among those who will handle these arrangements when the time comes.

Other Advantages

If desired, you may use the letter of instruction to voice personal requests and your expectations for how your heirs use their inherited assets. After all, these were your possessions! Some people also include their personal values, in a section known as the “ethical will,” which allows you to pass your core values and beliefs down to your family and beneficiaries.

Another benefit of this letter is that you can augment your living will with regard to end of life care, providing more detail about the circumstances under which you want to be kept alive or taken off of life support. This can be very helpful in reducing stress or uncertainty for your family if the health care directive or living will lacks this detail.

Conclusion

Remember, a letter of instruction does not replace a will, durable power of attorney or living will. If you don’t already have these documents in place, you should have them drawn up by a qualified estate planning attorney. A letter of instruction can be a fantastic tool to articulate your final wishes and decisions for your executor and heirs. Be sure to update it periodically and file it along with your other estate planning documents. At its heart, the letter of instruction is a last gift of your voice that you leave to your family, so make it count.